How will you be affected by the government’s tax and NI changes?
Millions of households will pay hundreds of pounds more in tax than planned next year as most of the mini-budget announcements made just three weeks ago by the then chancellor, Kwasi Kwarteng, have been reversed.
His successor, Jeremy Hunt, scrapped plans for an income tax cut, which would have saved some families hundreds of pounds a year. However, the 1.25 percentage point increase in national insurance payments will still be axed in November, meaning some will still benefit from a reduced tax bill. Here look at how the announcement will affect the finances of nine typical households.
Current status Pays £4,284 a year in income tax with a national insurance (NI) bill of £2,839, leaving a pay packet of £2,240 a month.
Under Kwarteng’s original plan The cut in the basic rate of income tax from 20% to 19% would have lowered his annual tax bill by £214, while the cancellation of the 1.25-percentage point increase in NI contributions from November would make him £22 a month – or £268 a year – better off. Overall, he would pay £482 less in tax.
Under Hunt’s revised plan He will still pocket an extra £268 a year due to the NI changes but loses out on the income tax savings.
Now She does not pay income tax or national insurance due to her low salary. She takes home £576 a month, which is topped up by a £623 universal credit (UC) payment and £87 child benefit. She will also receive the £650 of cost of living payments.
Original plan She will get a pay rise when the minimum wage – currently £9.50 an hour – goes up in April 2023. However, as she currently works less than 15 hours a week, she will be under pressure to do more hours or see her UC payments cut.
Revised plan Her financial situation does not change from the original plan.
Now
Read more on theguardian.com
